The oil politics of Iranian sanctions

Nwafor Polycarp

3 months ago

By Sonny Atumah

The heat from the United States is on and many wondered why Turkey is becoming the victim. Although it is not a significant producer or consumer of oil, it is naturally well located in the geopolitical equation. Turkey in southeastern Europe and Southwest Asia is bordered by Greece, the Black Sea, Georgia, Armenia, Iran, Iraq, Syria, the Mediterranean Sea, the Aegean Sea, and Bulgaria.

File: Oil and gas production

The American-Turkish relation is a complicated one. Since 1952, Turkey has been a member of the North Atlantic Treaty Organisation, NATO and has aimed to be a full member of the EU since the 1960s. NATO, led by America was formed in 1949 as an international military alliance to promote mutual defence and collective security during the Cold War. All that strategic alliance seemed to have changed since 2011.

Turkey, among other issues may be serving out a punitive measure for not abandoning Iranian oil as the United States revoked the Iran Nuclear deal of 2015. The Iranian sanctions imposed by the United States are part of the issues in the conflict with Turkey.

It is not certain whether Turkey will comply with the United States demand that it should cut down oil imports from Iran. Turkey imported an average of 176,000 barrels a day of Iranian oil in the last six months. Supreme excellence they say consists of breaking the enemy’s resistance without fighting.

Is that what the United States is employing to break down its perceived number one enemy? The Donald Trump administration has imposed crippling economic sanctions on Iran. In October 2017, Trump decertified the Iranian Nuclear Accord or Nuclear Deal entered into in 2015.

Negotiations between Iran and the American led coalition of the Permanent members of the Security Council P5 +1 (the US, UK, Russia, France and China plus Germany) led to the Joint Comprehensive Plan of Action, JCPOA otherwise known as the Iranian Nuclear Accord or Deal. The deal limited Iran’s capacity to civilian nuclear programme for power and medical purposes. The United States was empowered to watch over Iran with the US President required to certify that Iran complied with the agreement every 90 days. It was to be subjected to regular checks by international inspectors to ensure no perverse activities took place.

The United States has not been comfortable with Iran which it accused of not complying with the JCPOA. It alleged that tens of billions of dollars of windfall from the lifted sanctions had been used to expand the country’s reach in the Middle East region, and also further its role as the world’s leading state sponsor of terrorism.

Funds released to Iran from blocked reserves during the pre- nuclear deal had been allegedly used for military expansion and international armed conflicts; supporting President Bashar Al Asad of Syria, “Houthi” rebels in Yemen, Shiite militia forces in Iraq, and Lebanese Hezbollah as well as Shi’ite insurgents opposing American allies in Bahrain and Saudi Arabia. The imposition of full economic sanctions on Iran would block access to international trade and finance including billions of dollars in oil revenue and assets.

The American imposed economic sanctions took effect on August 6; oil and transactions with the central bank of Iran to come into effect on November 6, 2018. It is however, not certain whether all signatories to the JCPOA would go with America. Some governments believe that Iran is fully complying with the terms of the 2015 nuclear deal.

This position which is equally not bankable has encouraged the Iranian President Hassan Rouhani and his Foreign Minister, Javad Zarif, to make diplomatic shuttles to Europe for firm crude commitments from leaders. The Trump administrations road shows to Europe and the Middle East have also intensified to garner support for firm economic sanctions. Failure on the part of the United States to bring Iran now a wild card to abandon its political sins may be disastrous for the Trump administration.

At present Iran exports about 1 million barrels of oil per day to Europe, and nearly 2 million barrels to China, India, South Korea and Japan. Although many European countries are skeptical about the sanctions by America, some have cut down crude oil imports from Iran. It is however, not certain the extent Asian countries especially China and India would comply with the sanctions. Companies that invested in Iran are being pressured to severe business links before incurring penalties.

French energy giant Total, has considered divesting from its US$47 million Iran’s South Pars gas field under the threat of U.S. sanctions. How to make up for the crude that would go offline in November when the American imposed sanctions commence is what the world would contend with.

West Texas Intermediate crude for October delivery has moved up to US$68.87. If OPEC and the United States cannot make up for lost inventory from the American imposed sanctions, it is a danger signal that would weigh on global crude supply.